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Time to clarify stand on drug prices

Author:

Dr. Arun Mitra

The National Health Policy document 2017 has admitted that every year 6.3 crore people go below poverty line in our country. Nearly 70 percent of the out of pocket expenditure on health is on drugs. Therefore, pricing of the drugs is an issue of paramount importance. The drugs are being sold as branded medicines and also branded generic medicines. There is huge trade margin between the price to trade (PTT) i.e the price at which the manufacturer/ the marketing company sells the drugs to the distributor and the maximum retail price (MRP) in case of many drugs. Many a times this trade margin has been found to be 700 – 800 percent. Since the MRP is fixed by the manufacturer, the logic given for such a high trade margin is that if this margin is reduced the retailers will not sell their products. Since the company wants high sale and high profit, this trade margin has to be kept high. But in this the whole burden fallls on the consumer that is the patient.
Till 2013 the price of the drugs was cost-based where the retail prices/control prices were fixed on the basis of a costing formula to arrive at a manufacturing cost with post manufacturing expenses. But 2013 onwards this was changed to market-based pricing, calculating the average of the highest selling drugs. This is totally a flawed approach.
On the question of pricing of the drugs, in a case of Ranbaxy Laboratories Ltd. vs State of Haryana that on a drug strip of 10 tablets sold to the authorized dear at Rs.2, which has an MRP on the strip of 10 tablets as Rs.26, the Punjab & Haryana High Court noted, “It has to be noticed that although the petitioner is allegedly selling the drugs in the question to the consumer at about 900 percent of the reasonable price of the drug, but there appears to be no legal provision in force to safeguard the consumers from such naked fleecing by the drug manufacturers by overpricing the drugs to such an extent. It is surprising that no remedial or ameliorating step has been taken either by the state or by Union of India in this regard. The court hopes that now at least the concerned authorities shall wakeup and shall take some remedial step to save the consumer from such fleecing".
The government formed a committee on high trade margins in the sale of drugs under the chairmanship of Sudhansh Pant, Joint Secretary Pharma, Ministry of Chemicals & Fertilizers – Department of Pharmaceuticals, to go into the whole issue on 16 September 2015. This committee submitted its report on 9 December 2015. But it is now 18 months that the government has been sleeping over this report. This committee recommended no capping on the product the retail price of which is up to Rs 2 per unit (per tablet, capsule, vial, tube, bottle, injection). But it recommended maximum trade margin to be 50 percent on the product whose retails price ranged from Rs 2 to Rs 20, 40 percent on retail price Rs 20 to Rs 50 and 35 percent if the retail price was above Rs 50.
Even though this committee also did not spell on how the cost price of the drugs should be calculated, it took serious note of the excess trade margins. The government's sleeping over the report for a such a long period raises skepticism over its intentions.
The draft pharmaceutical policy 2017 talks on only good intentions but has no clear cut directions as to how it is going to bring the drug prices to make them affordable to all. Some issues which need to be highlighted here are:
*Price of a drug should be based on its cost accountancy and not on the market-based formula.
*The idea of splitting the drugs into essential and non-essential is absurd because any chemical once labeled as drug has to be essential as it is to be consumed only on the advice of a medical person.
*The Uniform Code of Pharmaceutical Marketing Practices (UCPMP) should be fully implemented. Expensive freebies to the doctors should be made a cognizable offence and it should be ensured that money thus saved is passed on to consumers in the form of price reduction of drugs. Backdoor methods of offering such freebies through conferences should be done away with. The expenses thus incurred should not be included in the expenditure of the company.
In the draft pharmaceutical policy 2017 whereas the document admits the glorious role played by the public sector pharmaceutical units, it considers that these units have now outlived their utility. This is totally a flawed approach. These units have been keeping the national needs as their priority. Because of the government's apathy these units face problems. The government should look into the difficulties faced by these units and sort them out. By completely rejecting them we will never achieve the aim of affordable drug prices. (IPA/The writer is a leading ENT specialist based in Ludhiana. He is the Senior Vice-President of Indian Doctors for Peace and Development (IDPD) and presently a member of the core committee of Alliance of Doctors for Ethical Healthcare in India)